Assuming a 1-year, money market account investment at 4.57 percent (APY), a 2.49% inflation rate, a 25 percent marginal tax bracket, and a constant $30,000 balance, calculate the after-tax rate of return, the real return, and the total monetary return. What are the implications of this result for cash management decisions? Assuming a 1-year, money market account investment at 4.57 percent (APY), a 25 percent marginal tax bracket, and a constant $30,000 balance the after-tax rate of return is %. (Round to two decimal places.) Assuming a 1-year, money market account investment at 4.57 percent (APY), a 25 percent marginal tax bracket, and constant $30,000 balance the after-tax monetary return is $ (Round to the nearest dollar.) Given an after-tax return of 3.43% and an inflation rate of 2.49% the after-tax real return is %. (Round to two decimal places.) Given an after-tax return of 3.43% and an inflation rate of 2.49% the after-tax real monetary return is $. (Round to the nearest dollar.) What is the implication of this result for cash management decisions? (Select the best answer below.) O A. No implication can be drawn from this information. O B. The implication is that it is easy keep up with taxes and inflation with liquid assets. Therefore, not only should the amount needed for financial emergencies and short-term goals be placed in liquid cash assets but additional funds should also be invested here. OC. The implication is that it is difficult to do any more than keep up with taxes and inflation with money market account investments so these funds should be put in higher-yielding investments like stocks and long-term bonds. O D. The implication is that it is difficult to do any more than keep up with taxes and inflation with liquid assets. Therefore, only the amount needed for financial emergencies and short-term goals should be placed in assets with such a low risk-return ratio. Additional funds should be invested elsewhere for a higher return.
Assuming a 1-year, money market account investment at 4.57 percent (APY), a 2.49% inflation rate, a 25 percent marginal tax bracket, and a constant $30,000 balance, calculate the after-tax rate of return, the real return, and the total monetary return. What are the implications of this result for cash management decisions? Assuming a 1-year, money market account investment at 4.57 percent (APY), a 25 percent marginal tax bracket, and a constant $30,000 balance the after-tax rate of return is %. (Round to two decimal places.) Assuming a 1-year, money market account investment at 4.57 percent (APY), a 25 percent marginal tax bracket, and constant $30,000 balance the after-tax monetary return is $ (Round to the nearest dollar.) Given an after-tax return of 3.43% and an inflation rate of 2.49% the after-tax real return is %. (Round to two decimal places.) Given an after-tax return of 3.43% and an inflation rate of 2.49% the after-tax real monetary return is $. (Round to the nearest dollar.) What is the implication of this result for cash management decisions? (Select the best answer below.) O A. No implication can be drawn from this information. O B. The implication is that it is easy keep up with taxes and inflation with liquid assets. Therefore, not only should the amount needed for financial emergencies and short-term goals be placed in liquid cash assets but additional funds should also be invested here. OC. The implication is that it is difficult to do any more than keep up with taxes and inflation with money market account investments so these funds should be put in higher-yielding investments like stocks and long-term bonds. O D. The implication is that it is difficult to do any more than keep up with taxes and inflation with liquid assets. Therefore, only the amount needed for financial emergencies and short-term goals should be placed in assets with such a low risk-return ratio. Additional funds should be invested elsewhere for a higher return.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
3
Transcribed Image Text:Assuming a 1-year, money market account investment at 4.57 percent (APY), a 2.49% inflation rate, a 25 percent marginal tax bracket, and a constant $30,000 balance, calculate the after-tax rate of return, the
real return, and the total monetary return. What are the implications of this result for cash management decisions?
.....
Assuming a 1-year, money market account investment at 4.57 percent (APY), a 25 percent marginal tax bracket, and a constant $30,000 balance the after-tax rate of return is %. (Round to two decimal
places.)
Assuming a 1-year, money market account investment at 4.57 percent (APY), a 25 percent marginal tax bracket, and a constant $30,000 balance the after-tax monetary return is $
(Round to the nearest
dollar.)
Given an after-tax return of 3.43% and an inflation rate of 2.49% the after-tax real return is
%. (Round to two decimal places.)
Given an after-tax return of 3.43% and an inflation rate of 2.49% the after-tax real monetary return is $
(Round to the nearest dollar.)
What is the implication of this result for cash management decisions? (Select the best answer below.)
A. No implication can be drawn from this information.
B. The implication is that it is easy keep up with taxes and inflation with liquid assets. Therefore, not only should the amount needed for financial emergencies and short-term goals be placed in liquid cash
assets but additional funds should also be invested here.
O C. The implication is that it is difficult to do any more than keep up with taxes and inflation with money market account investments so these funds should be put in higher-yielding investments like stocks
and long-term bonds.
D. The implication is that it is difficult to do any more than keep up with taxes and inflation with liquid assets. Therefore, only the amount needed for financial emergencies and short-term goals should be
placed in assets with such a low risk-return ratio. Additional funds should be invested elsewhere for a higher return.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education